Which liens are not wiped out at the Trustee Sale ?

If the 1st mortage lender is doing the foreclosure, exactly which liens are not wiped out? Is the winning bidder now responsible for paying them ? How soon do they have to be paid ? Is it possible that a lien gets recorded in between the time of a preliminary title report and the auction ? Would title insurance protect  against such a case ? Sorry for asking many questions if you don't mind :-)

Posted by TnMan2
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Let me start by saying that there are some nuances that chief title officers still debate, but let me try to give you a framework to work from. The basic concept underlying all of this is that when a lender makes a loan, secured by the property, they shouldn't become responsible for loans that occur later on. That simple rule frees the homeowner up to take additional loans without having to ask the earlier (or "senior") lenders for approval. In exchange later (or "junior") lenders understand that if the senior loan forecloses the senior lender is not responsible for insuring they are repaid. The next thing to understand is that this pecking order is simply based on the order in which things are filed at the county, by date and document number. It really doesn't matter what the documents say - I have seen deeds of trust (the document recorded for a loan in CA) labeled as 2nd mortgages that were actually in 3rd position. The only thing that can change this order, is a subordination agreement - which essentially sets forth that a loan recorded earlier agrees to be junior to a loan recorded later. Now a couple of additional things to note: property taxes are always senior. IRS liens that are junior are essentially wiped out but they have a right or redemption for 120 days (they can buy the home back from you for what you paid, without interest, or repayment of unnecessary repairs). Mechanics liens may have a claim if the repairs were necessary (the theory being that they were in the lenders best interest as they avoided further damage to the secured interest). Now with those things in mind let's get to your questions. Senior loans (either though date or subordination) are NOT wiped out, and occaisionally mechanics liens (I've never had it happen personally) and the IRS has a right of redemption.  The winning bidder isn't directly responsible for paying senior liens, but if they don't they will lose the home when those senior liens foreclose. Yes a lien may get recorded between the time you do your research and the sale - but it will almost always be junior so it doesn't really matter (I did see a lender record a subordination the day before the sale to try and sucker folks in at the auction - but it was clearly fraudulent and the sale was overturned). I'm not aware of any title insurance products for buyers at auction at this time. Hope that helps.

Answered by Sean


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I have a lien on someone's property because they owe me money.  How do I know if I am a "junior" or "senior" lien?  and if I am junior and wiped out what is the point of my getting a lien in the first place if it doesn't hold true?

Answered by Judy


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Hi Judy, It is based on the concept of "first in time equals first in line". Each document recorded at the county has a date, and a document number. With just a few exceptions documents recorded earlier (lower date and document number) are senior, and one's recorded later are junior. Let's assume there is one mortgage senior to yours, with a outstanding balance of $400,000, and that your lien is for $25,000. If the loan senior to yours begins foreclosure you have some options. If your lien is in the form of a deed of trust you can likely begin foreclosure as well as typically any failure to pay senior debt is an automatic default. To protect your position you have the right to make the payments on the first until you can foreclose and take control of the property (at which time you may have to pay the first off as it likely has a "due-on-sale" clause). Alternatively you can let the first foreclose, attend the auction, and bid the first up at trustee sale until the winning bid is enough to cover your lien (the trustee on the first will pay out any excess proceeds to lien holders in order until funds are exhausted or all liens are paid at which point the remainder goes to the homeowner). If the senior loan sells at foreclosure sale, for less than enough to cover your lien, and you FAIL TO PROTECT YOURSELF, then you are wiped out. Getting to have this option is the reason to file the lien.

Answered by Sean


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Hello Sean...  I just read your very informative response to the question, Which liens are not wiped out at the Trustee Sale ?.  I am looking at a Trustee's sale Oct 1 on a property owned by people that went bust in a failing restaurant business.  I have checked the recorder's office and found 3 mortgages - the first being the one foreclosed on (senior) and two others.  I am now concerned that maybe there are property liens out there somewhere resulting from restaurant debt lawsuits or equipment agreements, etc.  Would they be wiped out at the sale if not recorded?  Thanks for your insights.... Larry   

Answered by Larry


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Hi Larry - unrecorded liens are something I haven't had to face yet. My understanding is that as a bonafide purchaser for value, that had no knowledge of the liens before purchasing, you should be protected from claims as you relied on the recorded data, and it was the lienholders responsibility to protect their position by recording their lien. That said, one thing I do know is that anyone can sue you for anything, and in doing so they can tie up the property for a long time by filing a lis pendens. So if you expect trouble on a deal make sure to leave enough room in it to be worth the time and trouble  - I've found that if you plan for the worse, everything usually goes perfect, and if you expect everything to go perfect, you get nothing but trouble. ;-)

Answered by Sean


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I have a property that I'm interested in that is going up for trustee sale for HOA.  If I win the bid, will I be respondsible for any other loans on the property such as banks, 2nds and taxes?

Answered by cjwessel


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Right. And also note that the homeowner has a 90 day right of redemption after the trustee sale. See civil code 1367.4 (c) 4.

Answered by Sean


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Have you ever had liens recorded after the Trustee's sale, but before you recieved the deed in the mail and have it recorded?    I recently checked out a property where someone was living there and doing work on the property - supposedly in exchange for rent.  But if they kept all their records and did improve the property, it seems they could record a mechanics lien and you would be forced to either pay or sue?

Answered by scottlut


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I have not had a lien filed in that manner though I have had equally frivolous lis pendens filed. I disagree that I would be "forced" to pay or sue. That would only be true if I needed to resell the property and the title company wasn't willing to insure the transaction without a reconveyance (one could argue that is was wiped out by the foreclosure as despite the filing date it was for work incurred prior to the foreclosure). Also note that my experience is that the courts are not friendly to homeowners that play games and try to misuse the legal system to gain rights above and beyond those provided during the foreclosure process. That said it is importatnt to remember that anyone can sue your for anything and you should be prepared for this as a part of buying at the trustee sales.

Answered by Sean


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excellent. always confused before but you really cleared it up. wasnt aware of the 120 irs rule but i do now.

Answered by Anonymous


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I am looking at a house that has IRS liens filed after the 1st being foreclosed. However, the liens list delinquent tax years that pre-date the 1st. I think I know the IRS lien is junior unless recorded before the loan being foreclosed? The tax years are just information? How did this guy get loans with delinquent taxes?

Answered by richard_1


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As to your last question how would the lender know if the liens weren't yet recorded? Especially back in the days of stated, and low or no doc loans. Without being able to generally rely on recordings sale and lending would be nearly impossible. And yes, it is the recording date of the lien that matters, not the tax years.

Answered by Sean


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What happens if you purchase a home at the Trustee Sale, there happened to be IRS liens, and you sold the home within 90 days after becoming the owner, flipping it. What is the IRS came knocking on your door to purchase the property back from you within that 120 day period, but you have already sold it for profit?

Answered by RobertM


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Unlikely you'd be able to sell as most buyers would want title insurance and or need a loan that required title insurance. If it were to actually happen, I'd imagine the IRS could unwind both sales paying your buyer the amount you paid at auction, and then that buyer would have a claim against you. I haven't looked into it, so note this is just a guess.

Answered by Sean


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Sean, I just had a senior title officer tell me the following:  Concurrently recording trust deeds (ie.90/10, 80/20, 70/30 loans) are equal in seniority unless otherwise specifically stated on the face of the recorded TD. Therefore, even if the foreclosing TD appears to have priority based on the sequential recording number (xxxx-xxx111 is foreclosing and xxxx-xxx112 was recorded with same date/time stamp) xxxx-xxx112 will not be wiped out by the foreclosure sale initiated by the default of xxxx-xxx111. Xxxx-xxx111 will be extinguished, but the new buyer will be responsible for xxxx-xxx112 and title policy will list xxxx-xxx112 as an exclusion.  I had a local, highly respected, so. Cal guru confirm the title officer’s opinion. What say you?    

Answered by Anonymous


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I say you are getting smoke blown way up somewhere. Absolutely ridiculous on its face and is contrary to everything I've ever learned about title and to dozens of transactions I've done where sequential juniors have been wiped out.   Worse, it is completely non-sensical. Why would there even be such a thing as an 80/20 if the 80 was assuming the 20 upon foreclosure anyway? I think you've either misunderstood what they said, they are messing with you, or they are brain dead.   Do note I'm not a title officer or an attorney, so proceed with my opinion at your own risk. :-)

Answered by Sean


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GREAT information, I'm glad I stumbled across this page.   I want to buy a property at a trustee auction in a couple of days but I just found out that the foreclosing lender is in 3rd postiion.  There is a first mortgage, followed by a line of credit, followed by a 3rd loan by private party (foreclosing).  If I buy the property, will I be responsible for paying the other two loans since they were filed first?  Thanks.

Answered by Janell


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Yes, and the back property taxes too!!!

Answered by Sean


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I opened escrow on a property I bought at auction last week to get a preliminary title report. I know there are junior IRS liens and Franchise Tax Board Liens. I wanted to see what the title company would say about when they would be willing to issue title insurance to a buyer. To my surprise, none of the liens showed up in the preliminary report. If you relied on the prelim to buy at auction, it would have missed very significant title issues.  I am thinking about send them an email asking them about these other liens. Should I do this or just let it go until I get a buyer into escrow?

Answered by Mauleace


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The FTB liens shouldn't show, they were wiped out by the auction if they were junior. Did you review the exceptions to make sure there wasn't a note about the IRS lien? Perhaps it just isn't where you expect it to be. Your call as to whether to ask or not. If you do it will delay your ability to resell for 120 days, on the other hand if you don't they may find it anyway.

Answered by Sean


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If I am holding a first trust deed note and have begun the foreclosure process in California, do I need to attend the auction to bid the price up so that I don't lose the money owed to me, i.e. if the highest bidder bids only $150,000 and the note I hold is $350,000, do I need to attend to make sure I get the property back if the highest bid is way below the value of the property?

Answered by MikeP


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Do you have a trustee handling the sale for you? If so they will ask you for bid instructions before taking it to sale. Since you are the holder of the note and deed of trust, it is up to you where to start the bidding at.   The only reason you would need to appear in person to bid, was if you really wanted the property and were willing to pay more than what you are owed. The reason for this is that the maximum bid you can place as the note holder is the total amount due on the note. If you want to bid more you have to show up with cash like everyone else.   Hopefully you are using a reputable, experienced, trustee - they should be able to walk you through all of this and help you make sure no mistakes are made.

Answered by Sean


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First time visitor to site - killer information, WOW!   1) What is the reason to buy title ins. after the sale, will the title co actually insure my transaction if I  miss something? 2) Do you hire an abstractor to research every counties recorders office or will the title co.'s do the prelim for free if I pay for #1 above? 3) Is there an investor friendly title co that most investors use in Cal?   Appreciate your advice. 

Answered by Jet


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1) They certainly won't insure what you missed if they find it. They are also unlikey to give you an owners policy - though they may with some exceptions. 2) I ran my own in-house title plant, others use abstractors, some get info from customer service at a title co in exchange for escrows (hard deal to get), and I have heard of one title co doing pre's+insurance for hard money loans on auction purchases but that isn't common. Try taking the chief title officer at your local title plant to lunch and getting their opinion on local options. 3) In my experience it really depends on the local office more than the company.

Answered by Sean


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I am looking to purchase a property through trustee sale.  The foreclosing lender is NOT the senior lendor, there is another loan on the property (LIne of Credit) from another bank two years prior.  Am I responsible for the Line of Credit as well?  Also, if I buy the property directly from the homeowner, am I responsible for both loans?

Answered by Lisa Chew


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Hi Lisa. Yes, you would have to pay the senior loan if you bought the junior (later) loan at trustee sale. And yes, you would have to pay both loans if you bought directly from the homeowner.

Answered by Sean


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How are the loan terms handled?  Does it follow the original terms and interest rates? 

Answered by Lisa Chew


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I'm assuming you are asking about the terms on the senior loan if you buy the junior. It is important to know that the senior loan will almost certainly have a due on sale clause, and since a foreclosure is a sale, the senior loan becomes due in full upon your purchase of the junior loan.   That said, I have been successful in making payments on senior loans. Best bet is to work with the prior owner to get their payment information or coupon book, and then just try sending the payments. Has worked well for me in all but one case - in that case the senior loan demanded to be paid off, or else they would foreclose, wiping out my ownership.   Bottom line, you may be able to make payments under the current owners loan terms, but you better be prepared to pay it off.

Answered by Sean


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Quick question about wiping out junior liens. We recently opened escrow on a REO and the prelim title search found four junior liens. We were informed by the seller's agent that escrow would have to be delayed approx three months to wipe out these liens. Is this a typical timeframe? What exactly is the procedure that the bank must follow to eliminate the junior liens. Thanks.

Answered by me_eckard


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Are any of the junior liens IRS liens?  If so that makes perfect sense as the IRS has 120 day right of redemption and you won't be able to get title insurance (or a loan as they require title insurance) until that time period has passed. If non are IRS liens then I would go talk to the title company and ask what the issue is, as I see no reason why they shouldn't otherwise be able to issue a title policy.

Answered by Sean


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Hi, So there a a few houses I have my eye on that are going to Trustee sale. I have a 2 part question, 1. if its the 1st loan that's filed the NOD and NTS and I am the winning bidder and there are no back taxes Do i still have to pay the rest of the loan or just the default about? 2. I have done some homework and found that the NOD was filed on the 1st loan but then the NTS is under a different trustee and stating a loan from the trustee and doesn't state its for the 1st loan. How can I find out whats going on?

Answered by Matt


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great forum !

Answered by irene


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1. If you are the winning bidder, then you will owe nothing additional to have that loan removed from title. 2. Be sure to read the documents carefully and pay attention to which loan each is recorded against. Trustees make mistakes all the time.

Answered by Sean


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If you have a new question please start a new topic. Thanks, Sean

Answered by Sean


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How can you find out if there is a lis pending on a particular property?

Answered by Luis Renteria


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It will be recorded at the county recorder, just like IRS liens, judgments, loans and most other things that affect title to real property.

Answered by Sean


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if a HOA lien gets sold at the steps and shows THE BANK as the owner (trustee/trustor) and you win the bid but then find out that the law group the did the sale for HOA named the bank and the bank didnt own it would this unwind the trustee sale?

Answered by jason bouquet


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what are the chances of the IRS coming forword on collecting in the 120 days? Does the 120 days start from the day you buy the lien at trust sale?

Answered by jason bouquet


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From my experience the chances are pretty small.

Answered by Sean


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I'd guess no, but you should discuss specifics with an attorney to be sure.

Answered by Sean


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Hi, Does your response above apply to Arizona as well or just California?

Answered by Amy


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I have a situation where my client has purchased a property on the court house steps at a trustee sale. The previous owner has child support judgments recorded against the property and it was my understanding that this judgment is junior and should be wiped out. However the attorney for the county family court division is pursuing collection on this? Any thoughts? Thanks

Answered by Jeff Fontana


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Keep in mind foreclosure only wipes out their secured interest in the property, the county can certainly continue to pursue the prior owner, as well as any excess proceeds fromt he trustee sale. If they really are pursuing the purchaser, and the judgement was really junior, you may need to hire an attorney to address what seems to me to be an unsupported collection effort.

Answered by Sean


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This is a great thread. My question for anyone who knows the Arizona Trustee Auction / Sale Law: Assuming no subordination agreements in place and understanding the priority of existing loans, if I am bidding on the senior loan (first in time) at Trustee Auction, will the second HELOC (showing up on the title report as an Active second-in-time Mortgage) get wiped out?

Answered by Jack


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I bought a house a year ago at trustee sale for 320K, and I recorderd the title at Conty record office. Now i fid out that other lender?? put my house on trustee sale next month (by looking in ypor website/I'm a member , no one notified me the sale) due to default on mortgage payment (on loan 600K). Please let me know what it is and why it happens. Thanks

Answered by Julie Ng


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Julie - you left out a key item... was the loan you bought at trustee sale senior or junior to the one now going to sale. If you bought a second then you need to payoff the first or risk losing the property.

Answered by Sean


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I just came across a foreclosure wherein the loan is an old unreconveyed HELOC ($60K) from 2000. The property changed owners twice since this old HELOC and the last purchaser in 2009 plunked down almost 50% in cash. The property has dropped in value (now worth appx $550K) and yet this old senior (first in line) HELOC from a prior owner is the loan that's foreclosing. I tried to contact the current homeowner to alert them to this foreclosure (although I suspect they know) as it seems they have ample equity in their home and would fight vigorously to keep it. Who stands to win or lose if this loan (HELOC) is auctioned at the steps. Could an investor profit by buying this loan given the strong likelihood of a mistake by a title company for failing to ensure that the old HELOC was reconveyed?

Answered by Danny R


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When purchasing a CA condo in a trustee sale, who is responsible for the lis pendens for the HOA past dues, buyer or trustee?

Answered by Paul


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I assume you mean HOA "lien" not lis pendens. If so then it would be treated like any other lien. In some states, NOT CA, HOA liens can be super senior and are not wiped out by a senior loan going to sale. In CA it depends on whether the lien (not the CCRs) were recorded before or after the foreclosing loan.

Answered by Sean


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My guess is that it will play out like this: 1. If the homeowner is alerted they will (should) contact their title company, and the title company will payoff the loan and stop the sale. That is what title insurance is for. 2. If it does go to sale whomever purchases the property will end up dealing with the current owners title company and settling. I've purchased two deals that were similar, though not exactly, like this one. On both we ended up with a settlement with the title company. In one case a lawsuit was filed against us and the foreclosing lender as an apparent effort to try to scare the foreclosing lender into rescinding the sale so the title company wouldn't have to cut a check. Even on that one the ultimate settlement was very profitable. If you are going to pursue this as an investor just be sure to do thorough research. Title companies and lenders are very sophisticated, and their attorneys can be intimidating. Also don't both unless the potential for profit is substantial (market value minus your bid minus any senior debts that still need to be paid). For those thinking "but what about the poor homeowner", know that they'll be fine. This is the reason title insurance exists, and the title company will take care of them.

Answered by Sean


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Here a new question. I had a second position on property and the frist forclosed at a trustee's sale. There was a third who was omitted, I bought the first and didn't bid in my second ( I bought it directly from the owner the day of the sale). I thought I was getting clear title as I called the trustee to make sure all were notified and got a title report that showed the third. I have a subordination agreement from the third connected to my now wiped out second. does it survive the forclosure, or am I out of luck and the omitted third can just redeem the 1st and take possession.......I also sold the property directly after the sale to a third party for what we paid for the first and third.....doing a good semaritan thing to protect her also. what a mess

Answered by val bell


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You indicate that you purchased the property directly from the owner the day of the sale. Does this mean that the property did not go to trustee sale or that you were the winning bidder at trustee sale? If the trustee sale happened and it was the first that foreclosed then all junior liens are wiped out. If you "purchased" the property directly from the owner and stopped the sale then all liens would still be attached to the property. You do not tell us what state the property which would have an impact on the answer to the redemption question although typically a junior lien would not have a redemption period following the trustee sale. (this may not be true for all states). If you resold the property we assume that the new owner purchased a title insurance policy which would mean that they have clear and insurable title. If they did not purchase a title policy we highly suggest contacting your local title company and purchasing an owners policy as quickly as possible.

Answered by Michelle


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As president of our Home Owners' Association, I have just received a Notice of Trustee's Sale for a property in our development. We have several liens on this property for unpaid dues in the amount of approx. $14,000.00. Does the sale of this property in a Trustee's Sale wipe out our liens or is the new owner responsible for them?

Answered by Bobbie Meyer


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It would only wipe out junior liens... those recorded after the HOA lien. As such you should expect that anyone buying the HOA lien in question would have to pay off the first and second mortgage as well as any past due property taxes. This makes it very unlikely anyone will purchase the lien, and its quite possible the HOA is throwing good money after bad by paying the attorney to foreclose at all. Most second mortgages don't bother foreclosing at this point for exactly that reason.

Answered by Sean


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We are not initiating the foreclosing. It is being foreclosed by a bank. This is brand new info for us and I don't really understand this process. We are in Washington State if that makes any difference. It looks like they are delinquent for approx $53,000.00 not incuding our $14,000 liens on a home worth approx $750,000. Our HOA is just a bystander in this process. Are our liens protected in this situation? Will the new owners be responsible or will the liens just disappear? Do we need a lawyer to protect our liens?

Answered by Bobbie Meyer


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Your HOA's liens will likely be wiped out by the foreclosure, and there is likely little you can do to protect your liens. Couple of things to check: 1. A few states allow HOA liens to be super senior, which means they would not wiped out. I'm pretty sure WA is not one of them, but you check with an attorney. 2. If there is adequate equity in the property to satisfy the foreclosing loan, your liens and other senior debt then it may be worth foreclosing on your liens and selling the property. This could be a lengthy and expensive process so be sure there is sufficient equity. Finally, be sure to check with your associations attorney, while I'm pretty sure the above comments are correct I'm not an expert in WA HOA liens.

Answered by Sean


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Thank you for your help.

Answered by Bobbie Meyer


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Is an "abstract of judgement" made after the senior loan date was made, also wiped out by the property auction?

Answered by andrew


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If by made, you mean recorded, yes, that should be the case. But always look at the underlying issue if you can. Just because it is technically wiped out, does not mean the holder won't sue you and challenge that. Sometimes that is the real benefit of title insurance, protecting you from false claims.

Answered by Sean


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Thanks for the followup. I did more research and it gets more interesting...the owner took out a Real Estate Note prior to the 1st mortgage with a private party for $500k, which was notarize, and to be paid in full two years later, with interest of 6% per year. During the two year period, the owner refinanced her 1st mortgage, which is now in default. However the default on the Real Estate Not was only filed with the court after the 1st mortgage was taken out. So would I be liable for the Real Estate Note?

Answered by andrew


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Time to take the Chief Title Officer at your local title company to lunch... or consult an attorney.

Answered by Sean


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Are property taxes considered IRS taxes and subject to the 120 day right of redemption even if they have not been recorded?

Answered by Neil


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No, they are always senior and all past due property taxes must be paid by the buyer at auction.

Answered by Sean


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Should I assume that the published bid has included the delinquent property taxes even if they have not been recorded as a lien at the county?

Answered by Neil


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No, they are never included and like ALL senior liens will remain due if you win at auction. You can find the amount by inquiring with the county tax collectors office. Most tax collectors have an online interface to lookup past due taxes using the APN (which we show in the Location panel).

Answered by Sean


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Dear Sean. Would you please list the leins that will be wiped out in trustee sale and the ones that will not .in an #'d item form. as well as the leins that will and will not be wiped out in case of forclosure .what i learned from you all is wiped out in forclosure . Thank you, neptune

Answered by neptune


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It isn't an issue of type, but position. With rare exception junior liens are wiped out, senior liens (recorded before) are not. The main exception is that the IRS has a 120 day right of redemption. Junior mechanics liens may have the ability to collect in limited circumstances as well.

Answered by Sean


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While Sean and others have made mention of the occasional problems that arise from junior HOA liens ... I'd like to share what I learned from a veteran steps investor. There are certain HOA collection agencies that take over collection from delinquent homeowners and simply refuse to remove the lien after a steps sale is made to a third-party investor. Even though the law in CA technically wipes out a junior (and 99% of liens junior to foreclosing loan) HOA lien, the mere fact that the collection agency refuses all requests to remove the lien can create real problems when attempting to re-sell the property. The lien clouds title making it difficult, if not impossible, for the steps buyer to re-sell the property. Hence, many steps buyers simply choose to payoff the HOA lien even though they may not be legally obligated to pay it off. Has anyone out there had any success in getting an HOA collection agency (e.g. Pro Solutions) to remove an HOA lien after the subject property has gone to steps sale? Seems almost criminal for such HOA collection agencies to ignore the law by keeping such (theoretically wiped out) liens in place. Effective extortion it is.

Answered by Danny B


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Danny - note that the lien doesn't technically have to be "removed". For example 2nd mortgages that are wiped out by a 1st mortgage are never reconveyed. The only issue here is whether or not you can get the title company to insure around it. This is usually easier if the lien was recorded prior to the sale date. Harder if after because the title company can't tell whether or not is a lien for services before the sale (which you aren't responsible for), or after (which you are). Secondarily you may have to deal with getting them to stop their debt collection. On that front, I'd suggest the Fair Debt Collection Practices Act http://www.ftc.gov/os/statutes/fdcpajump.shtm. As you mentioned, I have had ones that have been just easier to pay, I just wanted to make sure everyone was clear that the right place to start is with trying to get the title co to insure around it.

Answered by Sean


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Thanks! ... very helpful and important clarification.

Answered by Danny B


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When buying at the trustee sale the best advice for this type of question is always have your title insurance rep which is actually gonna be working with you anyways to record/transfer title for you, To check the title record on subject property for any future problems w/liens on that property before you make that bid at the court house.

Answered by Peter berg


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Regarding the topic of pecking order and subordination agreements... Do the subordination agreements have to be separately recorded or do can they be contained within the recorded trust deeds? Can you just scan the recorded files database and conclude pecking order without reading actual documents?

Answered by Vinay Gupta


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Hi Vinay, The subordination agreement is a separately recorded document that references the Deed of Trust that is subordinating.

Answered by Michelle


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If I buy the 1st deed of trust at auction, and later found out that there were some claims to title that dated prior to the first DT. Since the first DT would have had a title insurance written for it when it was originated, would, I, as a buyer of such lien, also inherit such title insurance from the former lender?

Answered by Eddie


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No, you are not a party to the insurance policy and do not "inherit" it. That said, I'd recommend opening escrow with the same title company that insured the "1st" originally when you go to resell or get a loan on the property. A few possibilities: 1) they may rely on their prior underwriting and not look back further thus issuing you new title insurance, 2) they may have something in their prior title work that proves the claims are invalid and therefore will be willing to insure, or 3) they are going to have to really think about what to tell you regarding their prior mistake.

Answered by Sean


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Wow Sean! Thank you so much! You are a veritable fountain of knowledge! I am reviewing for my Arizona Real Estate Sales License and stumbling upon this site has been very beneficial to me! I definitely plan to visit this site on a regular basis. Thanks again.

Answered by Laurie


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I just bought a property in TX from a Constable Sale auction county court for HOA's lien. The previous owner still have an outstanding mortgage. What would happen now? does this Constable's sale wipe out all the mortages ?

Answered by mike


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Each state has different foreclosure laws. I don't know about Texas, but I would highly doubt that the sale of the HOA lien would wipe out the the mortgage. Most likely, you simply now own a property with a mortgage already on it. And the lender may have already filed foreclosure as well. But hopefully someone here with knowledge specific to Texas will chime in. In any case, you should probably speak to a good lawyer familiar with foreclosure/real estate law to see what options you have. Good luck!

Answered by MikeG


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HOA Liens recorded after the Ist mortgage stands as a Junior Lien & if you buy a a junior lien, other Senior liens, if any will still exist. You don't have to pay them but they can foreclose the property & when you resell the property they will have to be paid to close the property

Answered by Tariq


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Hello Sean, My husband and I have an opportunity to purchase a home at trustee's sale on November 7, 2011. We actually did a market analysis to see if it was a good investment. The paper stated the opening bid is $119,000 and the house is worth between $170,000 and $180,000. The 1st has foreclosed on the house for the $119,000. We contacted the owners to see if we offered them cash with an extra $10,000 before going to auction if they were interested. Found out through them that they also owe a 2nd of $100,000. We have a hard money lender willing to lend us the money with 7% interest for five years until we told him we would have to buy it at auction. He said he would never lend for an auction purchase because too many things can go wrong. He said you can't buy title insurance on the house to guarantee the junior liens wouldn't have rights. I was under the impression, the 2nd will be wiped out, correct? Tri-Counties bank holds the 2nd and has not foreclosed on the property. Am I not able to do a preescrow title search and then purchase title insurance? He would rather I talk the sellers into a short sale which means we are going to pay a much higher amount most likely. Can the 2nd come back later and sue us if we were to purchase the property at auction and would my title insurance protect us from that? By the way, we are in Northern Calfornia! Thank you, Sandy

Answered by Sandra


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Best bet for finding a hard money lender that will loan on a trustee sale is to ask around at the steps. Their rates will likely be substantially higher than 7%, but perhaps you could use them as a bridge loan. Very little chance you'll find a title company to give you a lenders policy that would cover the lender at the time of the trustee sale, so the lender has to be willing to accept the title risk until a policy can be put in place after the fact. If you do buy at trustee sale the 2nd can not come after you or the property as their security interest in the property will be wiped out by the foreclosure (they may still be able to go after the borrower). If you can't find the cash to bid on the steps, then a short sale is a reasonable suggestion. Typically the 1st and 2nd will cooperate such that the 2nd at least gets something. Finally, the opening bid is likely not what you will pay. If its worth 180k, you should expect to pay $135-150k at trustee sale.

Answered by Sean


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I'm interested in a property that will be auctioned off. On the preliminary title report, it states Abstract of Support Judgment recorded Octorber 04,2011, however, it does not have a price. I've seen this on other prelims where it says the same thing but will state, amount due $XXX. What does this mean? Is there a lien for something?

Answered by Mike P


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Best bet is to pull the document and read it. Are you sure it matters? If you are buying at trustee sale, and it was recorded after the loan in foreclosures, then it will likely be wiped out anyway.

Answered by Sean


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Sorry for asking rookie questions but I have another question. The prelim shows 1 abstract of support judgement recorded october 04, 2011 and another on 03/22/2001. It is a a trustee sale through auction.com. How would I go about pulling these documents?

Answered by Mike P


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You have a few options: 1) go to the county recorders office, there you can view them on screen for free or have them printed for a fee, 2) you can ask a title company for a copy (good to build a relationship with a title company if you are going to be buying at auction regularly, or 3) if you are a ForeclosureRadar customer you can purchase them for $3/ea in the app (go to Transaction History for the particular property, then add the 2 docs, then click purchase).

Answered by Sean


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hi please tell me step by step how to check if there are any kind of liens on the property. on or off foreclosure radar site,free or with fees... thanks

Answered by mel


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Hi Mel, You can purchase title insurance immediately after a trustee sale provided there are not any clouds on title that would prevent the issuance of that title policy. You mentioned 120 days and I believe what you are referring to is the 120 day redemption period by the IRS. If there is an IRS lien on the property then a title company would not insure the title until the redemption period had expired. We do provide a transaction history which includes Grant Deeds, Deeds of Trust and foreclosure notices. When available we also provide the link to the county Grantor/Grantee index so that you can search for reconveyances, subordinations and IRS liens. We also provide the link to the County Assessor where you can check for past due property taxes. You will find other valuable resources within the transaction history. You have the ability to purchase document images and customize the transaction history to show the results of your research. Additionally we provide a check list so that you can keep track of your research. We have a great recorded webinar on title research. To view the recorded versions of our webinars please click on "Webinars" under the Support and Training tab on our home page. You will then scroll to the bottom of the page to see the previously recorded webinars that we have on file. You can also register for our free webinars and view the recorded version by clicking on the following link: https://www.foreclosureradar.com/webinars.

Answered by Michelle


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Bought a property at a Trustee Sale off the courthouse in Texas. According to a lawyer I consulted, if the foreclosure was done by the Mortgage Lender, it extinguishes all other liens except Federal and Property Taxes. Another exception is if the Condominium Declaration specifically makes HOA liens senior. I checked with mine and it said it is junior to Lender liens, so the lawyer said the HOA lien can't be enforced. What I will try is to have them voluntarily remove the Lien, so it won't cause trouble in future title searches, etc. Hope it helps.

Answered by David S


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David S, - All kinds of junior liens (like in your case a junior HOA lien) get "wiped out" via fcl. sale. You would be wasting time and money trying to clear title of junior liens that have already been cleared by the fcl.!!! Title companies are fully aware of what liens have been cleared fm. title. A side note:In Every state I am aware of (Wa., Nv. Ca. Or. Ga. Fl and now Tx.) - HOAs put in their CC&Rs language that make any HOA lien junior to a first lender, at the least. If this provision weren't in the CC&Rs, lenders would not want to make loans. After all, HOA liens could, in theory, be so large the lender would be in 2nd position with no equity protection!. In Ca., HOA liens only have priority from the date the actual lien is recorded - meaning they are behind all loans/liens that recorded prior to the actual recording of the HOA lien.

Answered by miket


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I have a question in a particular (very interesting) situation. Let me pick your brains on this one: This is in Florida. Timeline: 1. In 2003, Person A purchases property and gets mortgage from Bank A. 2. In 2010, HOA forecloses on Person A, and becomes owner of property (subject to mortgage from Bank A). 3. In 2011, Bank A forecloses on Person A (also lists HOA as defendant), and Person B bids and purchases the property. 1. Will Person B have a clear title to the property? 2. Is Person B responsible for any HOA assessments Person A was supposed to make?

Answered by Chris Tillman


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1. Assuming the HOA is junior to the Bank A mortgage, and that there are no other liens or encumbrances, then yes it would be free and clear. 2. Unless Florida HOA's liens are super senior (this is true in very few states), then yes, person A should be free from any HOA claims prior to the date they purchased the property at foreclosure sale. While this is most likely right, please note that I'm not an expert in Florida foreclosure law, so I'd strongly suggest verifying this with a local attorney before putting any money at risk.

Answered by Sean


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Hi everyone, thanks for so much valuable info. A property is being auctioned (going to TS) in Ca. by the 1st TD, the owner has recorded a divorce Lis Pendens on the property ,does the date of this Lis Pendens recording matter? If I buy this property in auction, do the previous owners have control over my selling it? can they not remove the Lis Pendens? what would it take to have them remove it? what are things that they can legally do? If I get an attorney , can the attorney legally force them to remove it? what are the risks of buying this property? I am planning to sell this later and I want to make sure I can get title insurance on it. I really appreciate all the help I can get on this. Thanks again.

Answered by Tom


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I have had some trouble with lis pendens in the past. From my experience title companies won't remove them even though in reality most claims coming out of the suit (especially those around a divorce) would be junior to the foreclosing deed of trust and therefore wiped out by the foreclosure. Yes you likely can have an attorney file to have the lis pendens released. That said, be very careful that the lis pendens is not regarding pending litigation against the lender whose loan you are purchasing or any senior lenders. Most auction buyers I know avoid these, but I personally might pursue one if there was enough margin to justify the added time and expense. if you do choose to pursue it, I would recommend having your title company and attorney review it before proceeding.

Answered by Sean


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If it is discovered that as a result of a search of the recorder's office that there is no record of a 1st mortgage being recorded on a Michigan property, can the alleged lender foreclose on that property by simply recording the mortgage deed retroactively prior to initiating the foreclosure action?

Answered by Matt


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Likely yes. In most states recording of the mortgage isn't required, instead it provides lenders a measure of protection by securing their position in the property relative to other creditors who may claim an interest.

Answered by Sean


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If there is a child support judgement on a property in Orange County, CA and the parent who owes the judgement amount is letting the house go into foreclosure, what happens to the child support judgement?

Answered by kathy sanner


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Like any judgement, if it was recorded after the deed of trust that is being foreclosed upon, its interest in the property will be wiped out by the foreclosure.

Answered by Sean


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I would say that this is not true in many states where HOA liens are considered as "super liens" to certain limit. In Colorado, HOA can collect up to 6 months of HOA fees plus legal fees from the winner of the foreclosure sale regardless of the lien position, or even if the HOA lien is not recorded.

Answered by Jason Chen


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Already mentioned super liens in the post just above, but thanks for the specifics on Colorado.

Answered by Sean


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Sean...I'm a Missouri foreclosure investor and have spent the last two hours reading many of your interesting and educational comments here. The only lien type I did not see addressed in terms of whether it remains against the title after a trustee's sale is a city "property mowing/clean-up" lien. Of course, they are usually junior since they occur after the owners abandon the property. Whether they are "wiped off" or not may well differ from state to state. If you or anyone knows the Missouri law I would like to here from you.

Answered by Larrygs


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Hi Larry - from my experience in CA it depends. If the city has the right to roll the bill into your property taxes if it goes unpaid, then I have had them make the case that it is super senior in the same way property taxes are, which makes some sent. Obviously laws do vary by state, so your mileage may vary. :-)

Answered by Sean


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Larry - Sean answered what happens in lots of jurisdictions. Best source for you would be to call a local title company and ask to speak to a title officer.

Answered by miket


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In Texas. My husband and I signed 2 DOTs on the same day. First DOT was for $208K to purchase the house. Second DOT was for $17.8K and is entitled "purchase money DOT". Both with the same lender. The house was foreclosed and "sold" on the courthouse steps Jan. of 2009. Received an IRS F1099-A shows FMV of $250K and remaining mort. of $200K at the end of 2009 and reported on taxes as appropriate. Records show lender bought the house for $217+K. We did not receive the difference. In July of 2011 we start getting calls from a collection agency stating we still owe the $17.8K. I think NOT! Wasn't the purchase money DOT wiped out when the house foreclosed? BTW: the foreclosure has been accepted for an Independent Foreclosure Review as ordered by the OCC.

Answered by Alicyn


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Who is OCC? In many states, like Ca., there is no deficiency allowable under a purchase money DOT. Don't know about Tx. In states where a deficiency is allowed, the junior (2nd) will be wiped out as to the property - but you still can be sued, personally, because it is now an unsecured Note. Many times groups will buy these worthless notes for pennies on the dollar and shake down unknowledgeable people for some $.

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David S, - All kinds of junior liens (like in your case a junior HOA lien) get "wiped out" via fcl. sale. You would be wasting time and money trying to clear title of junior liens that have already been cleared by the fcl.!!! Title companies are fully aware of what liens have been cleared fm. title. A side note:In Every state I am aware of (Wa., Nv. Ca. Or. Ga. Fl and now Tx.) - HOAs put in their CC&Rs language that make any HOA lien junior to a first lender, at the least. If this provision weren't in the CC&Rs, lenders would not want to make loans. After all, HOA liens could, in theory, be so large the lender would be in 2nd position with no equity protection!. In Ca., HOA liens only have priority from the date the actual lien is recorded - meaning they are behind all loans/liens that recorded prior to the actual recording of the HOA lien. Sun Jan 1st 2012 at 1:08pm

Answered by miketh


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OCC = Office of the Comptroller of the Currency. Texas, like California, is a non-recourse state. I have also discovered that my purchase money DOT was junior to my other DOT. Since it was the "primary" DOT that was foreclosed, any surplus funds from the foreclosure sale should have been applied to the purchase money DOT. It appears that the amount the house sold for at foreclosure was such that both DOT's should have been satisfied. What, exactly, the $15,600.00 (the excess amount paid for the home at foreclosure) was used for is unknown. This is one of many "accounting" errors made by the loan service company that foreclosed in their name as if the lender had transferred the mortgage to them. This same loan service provider then "assigned" the purchase money DOT to a collection agency and said that the original lender was still valid. All in all, a nasty mess. This does not seem to be the correct forum to discuss the activities of this loan service provider with the exception of purchase money DOT. If, for your own edification, you would like to know the whole sorted, nasty details I would be more than happy to send you, via email, a copy of the 10 page letter I sent with my IFR request. Could be useful in helping others that are filing a request for an IFR. :) Fri Aug 31st 2012 at 8:34pm

Answered by Alicyn


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If there is an IRS lien on a property , How long a notice should be given to IRS prior to sale ? If the property is scheduled to go on trustee sale on Dec 27th & IRS lien was docketed on Dec 6th, would trustee still requires to give notice to IRS? Tariq Fri Dec 21st 2012 at 10:27am

Answered by Tariq


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Depends on when the Notice of Sale was recorded. If the Notice of Sale was recorded prior to December 6th, I'm not sure that the trustee managing the foreclosure process is required to keep looking for anything recorded after the NTS. If IRS Lien was recorded after the Notice to Sale, then the IRS probably was not notified, but not sure if Trustee is required to notify them for a subsequent recording. Not the expert on this, but that would be my opinion. Tue Jan 1st 2013 at 4:47pm

Answered by GJ


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If you buy at the actual foreclosure auction, you are liable for the unpaid property tax. Your bid did not cover this amount. If you wait and buy it from the bank, the bank can not close the sale to you without paying the taxes.. Sun Nov 2nd 2008 at 12:48am

Answered by AZ FR


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Actually the bank CAN resell a property without paying the back property taxes, though you are correct that it is not typical. Sean Tue Nov 4th 2008 at 7:37am

Answered by Sean


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